GDXJ Analysis

VanEck Vectors Junior Gold Miners ETF (GDXJ)

Update 7/1/2019: My short iron condor position showed a small profit with 18 days to go before expiration, and true to my trading rules, I exited for a small profit, with a debit of $0.19, two cents less than the entry credit, and with shares trading at $33.38, up $2.32 from the entry level. The implied volatility rank rose by 16.4 points during my holding period to 77.1% at the exit.

I took away 4.8% of maximum potential profit, which isn’t much. However, GDXJ returned to profitability within the sudden-death period of my trading rules, the period when options have fewer than 21 days before expiring. The idea behind it is that it is far better to take the money and run, putting it to use in a new position, rather than running the risk of a loss so late in the holding period.

I have often quoted the aphorism, “Risk is the mother of profit.” I’ll now add another, “Wishful thinking is profit’s evil twin”, because it more often than not rips our dreams away from us, laughing all the time in mad amusement. My rules are intended to avoid wishful thinking. Here’s another aphorism: “A bird in the hand is worth two in the bush.”

GDXJ moved sideways for 12 trading sessions after I entered, and then gapped up on news suggesting the Federal Open Market Committee would continue to lower interest rates. During the remaining eight sessions it closed above its profit range only once, and then began a retreat.

Overall shares rose by 7.5% over 28 days, or a +97% annual rate. The options position produced a +10.5% return for a +137% annual rate.

 I have entered a short iron condor spread on GDXJ, using options that trade for the last time 46 days hence, on July 19. The premium is a $0.21 credit and the stock at the time of entry was priced at $31.06.

The profit zone for this position is between $35.21 on the upside and $27.21 on the downside.

The implied volatility rank (IVR) stands at 60.7%.

Premium: $0.21 Expire OTM
GDXJ-iron condor Strike Odds Delta
Long 36.00 90.0% 12
Break-even 35.21 88.0% 14.5
Short 35.00 86.0% 17
Short 28.00 83.0% 15
Break-even 27.21 86.5% 12
Long 27.00 90.0% 9

The premium is 21.0% of the width of the position’s wings.

The risk/reward ratio is 3.8:1.

By Tim Bovee, Portland, Oregon, June 3, 2019


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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